Supreme Court landmark decision on Sales Tax- Exemption Certificates

The Supreme Court has ruled that states can mandate that companies, previously outside their jurisdictions, must collect sales tax on all transactions to which sales tax applies.

As a business, you may say, I am a manufacturer who sells to distributors, my customers purchase for resale. You are correct BUT do you have documentation from those distributors declaring their purchases as exempt due to resale?

Every customer must either pay sales tax or supply you with a state sales tax exemption.

Do you have the proper state sales tax rates for all jurisdictions?

Are you registered to collect sales tax in every tax jurisdiction? Most states have a centralized reporting for sales tax but not all. To remit sales tax you must be registered with the tax collection agency. Sometimes that requires that you must also register with the Secretary of State to do business in their state. It is not unusual for the income tax folks to also want a piece of the action.

Most states apportion your income in each state based upon factors that include revenue. You could end up filing very small returns in lots of states, some of which have minimum taxes. (California’s minimum is $800.)

I urge you to get spun up on the implications for this legal change and to discuss the situation with your tax advisors. Also investigate Avalara software. Avalara works with QuickBooks and they offer the rates, exemption certificate storage, and sales tax return preparation.

NOTICE: B2B CFO Partners, LLC, dba B2B CFO is an Arizona limited liability company that provides advisory and consulting services. B2B CFO® partners are independent contractors and are not officers, employees or agents of, or partners or joint ventures with, the companies they serve, nor are they independent CPAs.